Impact of FDA Approval Announce-ments on U.S. Medical-Device Firms: Evidence from Abnormal Returns and Firm-Level Characteristics
Author
Thor, Søren Søndergaard
Term
4. semester
Publication year
2026
Submitted on
2026-05-19
Pages
56
Abstract
This thesis examines how investors can use information about FDA approval announcements for U.S.-listed medical-device companies. Prior research has focused mainly on pharmaceuticals and biotechnology, even though devices differ in important ways, including regulation, commercialization, hospital adoption, reimbursement, and post-approval execution risk. The study uses a short-horizon event-study approach to measure cumulative abnormal returns (CARs) around the announcement; CARs capture the total stock reaction beyond what general market movements would predict. It also tests whether these reactions relate to firm characteristics such as R&D intensity (the share spent on research and development), CAPEX intensity (investment spending), size, leverage (debt), ROA (profitability), and asset turnover (operational efficiency). The results show statistically significant negative average CARs across all event windows examined. This means approvals are not uniformly seen as positive valuation shocks in the device sector; instead, they act as information-resolution events in which investors reassess expectations, commercial uncertainty, and execution risk. Differences across firms help explain the variation: higher R&D intensity is generally linked to less negative CARs, while larger size, higher leverage, higher profitability, and greater operating efficiency are associated with more muted or negative responses in several models that control for firm differences. Overall, investors should treat anticipated FDA approval announcements as short-term risk events and interpret them in light of the approving firm’s financial and operational profile.
Denne afhandling undersøger, hvordan investorer kan bruge viden om FDA-godkendelsesmeddelelser for amerikansk børsnoterede virksomheder inden for medicinsk udstyr. Tidligere forskning har især fokuseret på lægemidler og biotek, selv om udstyr adskiller sig på væsentlige områder som regulering, kommercialisering, hospitalsadoption, refusion og risici efter godkendelse. Metodisk anvendes et kortsigtet event study, der måler kumulative abnorme afkast (CAR) omkring selve meddelelsen; CAR er den samlede kursreaktion ud over, hvad markedet normalt forklarer. Studiet tester også, om reaktionerne hænger sammen med virksomhedskarakteristika som F&U-intensitet (andel brugt på forskning og udvikling), CAPEX-intensitet (investeringer), størrelse, gearing (gæld), ROA (rentabilitet) og aktivomsætningshastighed (driftseffektivitet). Resultaterne viser, at de gennemsnitlige CAR er statistisk signifikant negative på tværs af alle undersøgte tidsvinduer. Godkendelser opfattes altså ikke ensartet som positive værdi-nyheder i udstyrssektoren, men fungerer snarere som informationsafklarende begivenheder, hvor investorer genvurderer forventninger, kommerciel usikkerhed og udførelsesrisiko. Variation i reaktionerne kan delvist forklares af virksomhedsforhold: Højere F&U-intensitet er generelt forbundet med mindre negative CAR, mens større størrelse, højere gearing, højere rentabilitet og højere driftseffektivitet i flere modeller er knyttet til mere dæmpede eller negative reaktioner. Samlet set bør investorer betragte forventede FDA-godkendelser som kortsigtede risikobegivenheder og tolke dem i lyset af den godkendte virksomheds finansielle og operationelle profil.
[This apstract has been rewritten with the help of AI based on the project's original abstract]